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Coronavirus
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SBA loans may help producers soothe COVID-19 impact

Two-year payroll loans may be forgiven.

With pork processing plants idling or closing, and COVID-19 continuing to spread, the U.S. pork industry and its individual producers are taking a hit, both financially and emotionally.

Though it may not completely offset the economic hit from lost hog markets, the Small Business Administration is taking measures to help soften some of the blow. Kent Bang, vice president of Swine Lending at Compeer Financial, gave a brief outline of some programs available to hog producers during a National Pork Board webinar.

The Coronavirus Aid Relief and Economic Security Act, better known as the CARES Act, was approved by Congress on March 27, and by April 3 applications were already being accepted for the SBA Paycheck Protection Program. "It's designed to help small business and this go around, agriculture is included," Bang says. "This is designed to essentially assist small businesses and continue to meet payroll. … available to companies that have 500 or fewer employees. It expands eligibility under the SBA 7(a) program to help businesses cover costs related to payroll, and that includes healthcare costs, rent, mortgage interest and interest on existing debt and utility payments."

The PPP was opened to independent contractors and self-employed individuals on April 10. Applications will be accepted until June 30, "but we've seen a significant rush towards getting applications in and getting approval quickly just simply because of some fear in funding limitations," Bang says.

This program requires no collateral for the loan or personal guarantees. Loan amounts will be based on 2 ½ times your average monthly payroll costs for the time period April 1, 2019, to March 31, 2020, limited to $10 million loans. These are two-year loans with 1% interest and no fees, with the potential that the principal of these loans will be forgiven. There is a $100,000 cap per year per individual for the combination of salary and benefits.

Loan forgiveness may be granted. "Our expectations would be that most of these loans would be forgiven," he says. Forgiveness eligibility is determined by maintaining payroll and spending the loan money on the specified qualified costs. "As long as you're maintaining the same number of employees and at least 75% of that base rate of the base loan goes back to payroll, then you would qualify for the forgiveness of that loan. … You must maintain staff numbers in the eight weeks from the time the loan is made and following that to maintain the payroll and the expenses on that loan to have it forgiven."

SBA-certified lenders are eligible to offer these loans, and since agriculture is new to 7(a) program, lender eligibility has also expanded with the inclusion of the Farm Credit System. Bang says Compeer Financial made the decision to participate to "support our clients and make it easy for them to apply."

Bang suggests speaking with your lender for program details, or visit SBA.gov, or check National Pork Board's COVID-19 resource page. Log on to catch all of Tuesday's NPB webinar "COVID-19 Financial Resources, Current Public Health Situation and Biosecurity Tips."

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